US Politics Analysis: Can America Overcome "Deficit Fear" to Deal with Unemployment?

Senator Patty MurrayFor the last two years, debate over the deficit has dominated political discourse in Washington, driven by a Republican majority in the House. Along the way voters’ main concern --- policies that create jobs --- has been sidelined as Democrats have concentrated on defending the entitlement programs, primarily Medicare and Social Security, that Republicans have targeted for reform.

However, that may be about to change. Senator Patty Murray, the Democratic Chair of the Budget Committee, is not as respectful of the need to build coalitions as her predecessor. Murray is a conviction politician, and she feels her middle-class constituency is being betrayed by a callous GOP caucus more interested in abstract arguments about deficit reduction than the human costs of a damaged welfare system.

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US Economy Special Analysis: America's Credit Rating is Downgraded --- And It May Happen Again

S&P have made it clear in their  press release that this downgrade could be just the first step, with a further reduction to AA if certain policy changes are not made in Washington. Thisis no surprise: S&P had warned since April that if no long-term plan to halt America's soaring debt was put in place, then a downgrade would be the response. Politicians in Washington ignored that caution, and it will be interesting to see how those same politicians will react to the conditions S&P are setting out to avoid a further downgrade.

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US Politics Opinion: Loathing and More Loathing in Washington DC

A wise man once told me there were two things in this world you do not want to see made: sausages and a political deal.

And so it is with the news that that the legislative and executive branches of the US Government have reached agreement on lifting the US debt ceiling, a step which should have been a formality. We are being treated to congratulatory statements by America’s political leaders of common sense prevailing and of the spirit of compromise.

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US Politics Audio: Scott Lucas on the BBC about the Debt Deal

I did several interviews this afternoon about the developing deal in the US over the Federal debt. Questions ranged from "who wins politically?" (answer: Republicans win the battle but Obama probably wins the war, at least for the 2012 Presidential election), "who wins economically?" (answer: nobody --- this is a bad economic "solution" and we are likely to be back at this point in 2013), and "what does it mean for Britain?" (not as much as people might think).

BBC WM: The discussion starts just before the 1:04:00 mark.

BBC Coventry and Warwickshire: The interview begins just before the 37:00 mark.

US Politics & Economy: Scott Lucas on the BBC About the Debt Crisis

Complementing James Miller's summary of the battle in Washington over the Federal Government's debt, with the prospect of a US default next week, I was in a discussion on BBC Radio 2 this lunchtime about the political and economic causes of the problem and on the question, "Does this mean America is on its knees and finished as a superpower?"

(The answer to the question is easy, "That is the wrong way to look at the current situation." Explaining the causes is a lot more complex, although James Miller's "Start with the tax cuts", and the Government spending binge of the last decade is a good beginning.)

The discussion begins just before the 1:11.00 mark. My contribution is from 1:20.45.

And later in the afternoon, I had the chance on BBC West Midlands to offer an introduction to the "debt ceiling", the politics of the crisis, and the question, "Does it really matter if the US defaults next week?"

The chat starts just after the 1:41.30 mark.

US Politics & Economy: Explaining Washington's Dangerous Game of Chicken on the Debt (First, Look at the Tax Cuts)

Photo: Jewel Samad (AFP)Right now the American conversation is being driven by fear, creating a further crisis in the attempt to solve the initial one.  That fear is embodied in the idea that Obama is driving a far-left social agenda and a tax-and-spend socialism, and in the belief that taxes cannot be raised without killing the American economy. But President Reagan raised taxes 11 times, including during a recession, and Obama has cut taxes. Reagan raised the debt ceiling 18 times, and Obama is trying to pass a plan that will only require him to do it once. President Eisenhower stimulated the economy by subsidizing higher education and by building infrastructure, but today he would be considered a socialist for his initiatives. Fifty years later, taxes are at an unrealistic historic level, far lower than they were under all Republican administrations.

The fear is unfounded. The taxes are too low, the debate has gone on too long, and it is time that the Republicans compromise on revenue so that the nation is brought into line with what all of the facts are telling us.

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US Politics Analysis: Darkness Before An Agreement on the Federal Debt?

With the usual disclaimer that it could all change tomorrow, there is hope that the adults in Washington can get beyond the "weasel" rhetoric and accusations of childishness to hammer out a deal that moderates on both sides can swallow as a necessary evil.

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US Politics Analysis: The Republicans' Damaging Myth of Lower Taxes = More Employment

Last week, President Obama finally showed some of the leadership over the issue that his critics have demanded. But his new engagement with the debt limit talks, and his desire for a long-term deal, have run headlong into the brick wall of the Republican insistence that spending cuts are the only acceptable means for cutting America's deficits. Even though virtually every moderate media observer is demanding some revenue increases as part of any meaningful deal and even though there is reason to doubt tax increases would be as harmful to the economy as conservatives maintain, Republicans seem prepared to hold this position to the point of breakdown.

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US Politics Special: Fiddling While America Defaults?

With four weeks to go before the US faces a possible default on its debt, there is still little sense of how President Obama will lead the country out of the public finances mess the nation faces. It defies belief that the Administration does not have some kind of long-term strategy to ensure that America pays its bills come 2 August, but quite what that plan is nobody outside the Administration could claim to know for sure.

One disturbing possibility to begin considering is that Obama is privy to information that the crisis in America's finances is worse than thought --- his seeming reluctance to get fully involved in the debate is, in fact, a masterful attempt to avoid spooking the markets before a Band-aid can be slapped on the problem. That is pure speculation, but it says something about the ineffectiveness of the President that the only way to take some cold comfort from his performance is to imagine an even worse scenario.

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US Politics and Economy Analysis: Obama Talks Corporate Jets But Fails to Lead

Obama's demeanour does little to suggest he takes the problem as seriously as the authors of the Congressional Budget Office report. He is flunking his responsibility to take the initiative in explaining to the public the magnitude of the issues at stake. When he talks corporate jets not entitlement spending reform, he only makes it harder for those voices in Congress who are struggling to lead responsibly to be heard. If the president does not appear to be taking them seriously --- to my knowledge, President Obama has not once publicly acknowledged or encouraged the efforts of Sen. Conrad to build some sort of bipartisan consensus on the deficit, why should anyone else?

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